WHILE the verdict has yet to be determined, current uncertainties point to the dampening of investors’ sentiment on Serba Dinamik Holdings Bhd with negative near-term impact imminent upon the uplifting of its trading suspension.
This holds true as the global oil & gas (O&G) integrated engineering services provider shed a hefty RM1.8 bil to RM4.2 mil in market capitalisation at the resumption of its trading with a straight limit down to RM1.13 after plunging 48 sen (29.18%) with 14.5 million shares traded.
The stock was last traded on Tuesday (May 25) at RM1.61 prior to the damning announcement of its external auditor since 2013, KPMG, flagging some audit matters in relation to the company’s FY2020 financials.
Aside from a bashing on its stock price, Malacca Securities Research is concerned that the latest development would also affect Serba Dinamik’s current two-star ESG Grading Band rating in accordance with the FTSE Russell ESG Ratings Methodology.
“We also do not discount the possibility of Serba Dinamik being removed from the FTSE4Good Bursa Malaysia Index in the next semi-annual review in June 2021,” opined analyst Kenneth Leong in a company update.
“In the meantime, the Securities Commission (SC) is also investigating the alleged accounting malpractices and has secured documents from Serba Dinamik to assist on the matter.”
While Serba Dinamik has furnished all information requested to SC, Malacca Securities Research expects investors to steer clear of further position pending further clarity.
Yesterday, the Institutional Investors Council (IIC) joined the Minority Shareholders Watch Group (MSWG) in objecting to the proposal by Serba Dinamik’s board to remove KPMG in light of the red flag by its external auditor.
All-in-all, Malacca Securities Research downgraded Serba Dinamik to “sell” (from “buy” previously) with a lower target price of RM1.30 (from RM2.37 previously).
“Our target price is derived by ascribing a lower target PER (price-to-earnings ratio) of seven times (previously 13 times) to its FY2022F EPS (earnings per share) of 18.6 sen after taking into account the risk in relation to the audit issue,” justified the research house.
“The lower target PER represents a 50% discount to the mid-large cap O&G companies listed on Bursa Malaysia. A re-rating will be in the cards, should a clearer picture come into motion and the matters above have resolved overtime.”
Also bearish about Serba Dinamik’s immediate future is TA Securities Research which also downgraded the company to “sell” (from “hold” previously) with a target price of RM1 (from RM1.70 previously).
“At this juncture, apprehension over Serba’s corporate governance and financial integrity weigh on sentiment,” suggested analyst Kylie Chan Sze Zan. “We believe investors will not completely rule out the possibility of accounting and operational irregularities on Serba’s part.” – May 31, 2021
Editor’s note: This version correctly attributes the quotes to the right research house.
